SMM Copper Morning Comment

LME copper prices opened at $8389/mt and closed at $8250/mt last evening, a drop of 1.13%, with the low-end of $8238/mt and the high-end of $8422/mt. Trading volume stood at 23,000 lots, and open interest stood at 282,000 lots. The most active SHFE 2401 copper contract prices opened at 68050 yuan/mt and closed at 67200 yuan/mt last evening, down 0.77%, with the high-end of 68190 yuan/mt and the low-end of 67200 yuan/mt. Trading volumes stood at 29,000 lots and open interest stood at 149,000 lots.

On the macro front, ADP employment in the US in November recorded 103,000， compared to the expected 130,000. This confirmed the weakening of the U.S. job market and strengthened market expectations for the prospect of the Federal Reserve cutting interest rates again. In terms of fundamentals, according to SMM, the tight supply of goods in Shanghai has been alleviated to a certain extent. Both imported copper and domestic copper have arrived. However, due to high premiums, some companies shut down their furnaces. It will still take time to restart the furnaces. Therefore, although prices dropped significantly, it did not trigger large-scale downstream purchases. In addition, the expansion of the price spread between front-month and next-month contracts has a certain suppression on the premiums and discounts. If it continues to expand, it is expected that the premiums and discounts will continue to decline. Inventories in South China declined, which combined with a downward trend in the market, prompted holders to raise prices. But due to the large price spread between front-month and next-month contracts, downstream purchasing enthusiasm was not high. In terms of consumption, more companies took deliveries under long-term orders at the beginning of the month. If the market stabilizes, demand is expected to increase in the future. There will be room for copper price increases.